Describe the sources of finance that a public limited company (plc) may use to expand. - Scottish Highers Business Management - Question 4(a) - 2022
Question 4(a)
Describe the sources of finance that a public limited company (plc) may use to expand.
Worked Solution & Example Answer:Describe the sources of finance that a public limited company (plc) may use to expand. - Scottish Highers Business Management - Question 4(a) - 2022
Step 1
Bank Loan
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Answer
A bank loan is a sum of money borrowed from a bank that must be paid back with interest. This source of finance is a reliable option for many public limited companies (plcs) as it usually provides a substantial amount of capital required for expansion.
Step 2
Mortgage
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A mortgage involves borrowing a sum of money against property or land, which may be repossessed if payments are not made. This can provide significant funding for expansion, using existing assets as collateral.
Step 3
Venture Capital
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Venture capital is typically a risky investment where investors provide capital to start-up or small businesses in exchange for equity. This can be a suitable option for a plc looking to develop innovative projects.
Step 4
Selling Shares
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A public limited company can raise funds by selling new shares to investors. This allows the company to gain additional resources without incurring debt.
Step 5
Retained Profits
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Retained profits refer to the reinvestment of profits back into the business. A plc may use these profits as a source of finance to support its expansion efforts.
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